Qatar’s sound financial system is “supportive” of its outlook, the Economist Intelligence Unit (EIU) said and noted the country’s currency regime should be able to “weather the short-term shocks” posed by the coronavirus pandemic.
The country’s large stock of public debt, however, weighs on its outlook, the EIU said in its latest economic update.
Nonetheless, the EIU noted “Qatar’s ability to fully service its debt obligations remains strong.”
The EIU said the riyal’s peg to the dollar is backed by ample foreign reserves and the assets of the Qatar Investment Authority (QIA, the sovereign wealth fund).
“Despite the current account moving into deficit in 2020-21, the currency regime should be able to weather the short-term shocks posed by the coronavirus pandemic,” the EIU said.
The currency risk rating remains at BB, despite the score deteriorating by five points.
In terms of the country’s banking sector risk, the EIU said despite a three-point deterioration in the score, banking sector risk remains BB-rated. It is supported by a strong regulatory framework and solid capital and liquidity indicators. Commercial banks in the country have been increasing liquidity from abroad in the form of a number of debt issues, and cash injections from the QIA have bolstered banks’ liquidity. The ratio of non-performing loans as a proportion of total loans has historically been low, but it is likely to rise in the short term.
In an earlier update, the EIU said the country’s real economic growth will remain stable throughout most of the long-term forecast period. However, economic diversification investment projects will sustain robust growth until 2030, before slowing thereafter. There remains potential for bursts of high growth if further gas export projects, beyond those planned for the mid-2020s, are approved by the government.
Diversification and the expansion of the services sector, funded by the State’s hydrocarbons wealth, will also provide opportunities for growth.
The population will continue to increase, largely through immigration, to 3.9mn in 2050. As a result, growth in real GDP per head will be much slower than growth in real GDP, the EIU said.
Qatar’s overall business environment score has improved slightly, rising from 6.69 for the historical period (2014-18) to 6.88 for the forecast period (2019-23), an earlier update said.
However, improvements in other countries mean that Qatar’s global ranking slips from 34th to 37th, although its regional ranking remains steady at third. The largest improvements, in terms of points, are in taxes (up by 0.7 points to 8.8) and in market opportunities (up by 0.5 points to 6.3).
